Full Judgment
The respondent to this appeal A.Z. Electronics and Electronic Entities, notice issued to them proposed denial of the benefit of notification 175/86 which each of them availed of on the ground that there was "mutuality of interest" between the two firms. The factors relied upon in support of these assertions were these: M.K. Gujarati and A.C.Pendse were partner of A.Z. Electronics and therefore their respective wives and the father of Gujarati were partners in Electronic Entities; Electronic Entities did not have a separate factory; the correspondence between each of these firms and customers sometimes referred to the other firm as a "sister concern". The Collector has not found it possible to deny the exemption on these grounds and has cited decisions of the Tribunal to say that each of these factors does not constitute sufficient justification. The appeal does not allege any fresh ground, mainly reiterating the ground contained in the notice.
2. The show cause notice did not say, or suggest that one of these two firms was a fictitious entity or a mask for the other who was the real manufacturer. Notice itself was issued to both persons and duty is demanded from each of them by denying the benefit of notification. The notice also refers to an existence of collusive arrangement between them. All these do not suggest a case for denying benefit of notification on the ground that one was a non-existent entity, the manufacturer was only one of these two, in this situation, perhaps it could be said that clearance attributed to one company should be included in the clearance of the other. There is no such allegation therefore, the basis for denying the benefit of the exemption is unsound. We therefore decline to interfere with the Commissioner (Appeal)'s order.
3. The show cause notice issued to A.Z. Electronics also proposed inclusion in the assessable value of the uninterruptible power supply (UPS for short) manufactured by it of the cost of batteries that were ultimately to form part of these system at the hands of the buyer. It proceeded on the footing that the cost of batteries were included since they were essential apart of the UPS, which could not function without these batteries. The Commissioner has accepted the reply of the respondent that it did not manufacture the battery but only arranged to supply to the buyers of the manufacturers of such batteries. This is challenged in the appeal on the ground that the battery is an integral part; reliance is based upon the decision of the Tribunal in Kerala State Electronics Development Corporation Ltd. vs. CCE 4. We do not find it possible to see how the fact that battery is an essential part of the UPS (counsel for the respondent does not deny) determined the includability of these battery in the value of these systems. Excise duty is on manufacture. If a person manufactures incomplete machine apparatus or equipment the value at which these incomplete materials are liable to duty cannot be determined by adding to it prices of parts or components they would be required to make a machine complete. In the decision of the Tribunal relied upon in the appeal, we do not find recorded any dispute that the batteries under consideration were supplied with the UPS. The bench did not accept the contention of the manufacturer that the cost of these batteries was not includable when they were so supplied. These considerations would not apply when the battery does not even reach the hands of the manufacturer of the UPS, as a contended before us. The correct position in that case would be that the respondent manufactured incomplete UPS and cleared it and arranged to supply, as a trading activity the battery. The decision of the Tribunal is overwhelming in the respondent's favour. The decision of the Tribunal in CCE Coimbatore vs.
Jeetex Engineering Ltd. 2000 (130) ELT 801 cites eight decisions holding in favour. The decision of the Tribunal in CCE vs. D.B.Electronics Pvt. Ltd. 2000 (39) RLT 913 is specifically on the issue before us - inclusion of the value of batteries in the value of UPS.The decision of the Tribunal in Tata Libert Ltd. vs. CCE 2000 (39) RLT 1006 is also proceeded on the footing that the batteries were essential part of UPS.